Ontario led Canada’s major agriculture producing provinces in farm land value increases in 2019 according to Farm Credit Canada’s (FCC) annual summary of land sales across the country.
The Maritime provinces led the increases with 22.6 per cent in Prince Edward Island and 17.2 per cent in New Brunswick.
A 5.2 per cent increase across the province tied as the lowest national increase since 2010.
Why it matters: Land values are important to farm business planning, especially if a farm is looking to expand.
Ontario’s increase was 6.7 per cent, compared to 6.4 per cent in Quebec, 6.2 per cent in Saskatchewan and four per cent in Manitoba. Alberta had a 3.3 per cent increase in farm land value.
Within the province, there were significant increases in the near northern areas of the province. The northwestern region of the province, which encompasses Bruce and Grey Counties had an 11.3 per cent increase, as the region caught up to increases in other areas of the province and as farmers from further south continued to seek out new places to buy land.
The north-central region, to the east of Toronto, had an increase of 7.8 per cent and FCC attributes some of that to the expansion of Hwy. 407, bringing more Toronto-area buyers to the region.
The south western and south central regions, which cover the area from Toronto to Sarnia continued to have the highest land values in the province at an average of $18,755 in the south western region and $17,835 in south central.
J.P. Gervais, FCC’s vice-president and chief agricultural economist says that he doesn’t expect the coronavirus situation to have a large effect on land values as there remains a limited supply of farm land that comes available each year. Crisis or not, it always goes back to farm income, he says.
“To the extent we can anticipate farm income not to be affected too much by the crisis, then I expect the impact will be minimal,” he says. “We still have a very limited supply of farm land available for sale. Interest rates are really low, 50 basis points below where they were the month before. I expect borrowing costs may still decline a little bit.”
The markets are unpredictable, he says. Most commodities have declined in price, but then come back up again. The outlier is corn, affected by declining demand for ethanol with a dropping oil price due to a production level dispute in OPEC and less demand due to coronavirus isolating.
However, as long as exports can continue, he says the demand is there and last year was a poor production year across the country due to weather. If production rebounds, it could be a decent year for farmers, Gervais says.
“It’s not out of the question that from a pricing standpoint we could have a good year,” he says.
Farms continue to get larger, but the rate of increase has slowed. There’s growth in smaller farms too, which Gervais says is a healthy development.
“Smaller farms are getting in and finding profitable opportunities.”
Farmers continue to have to work harder to make farm land purchases work, as Gervais says the ratio of price per acre to crop receipts has continued to widen.
FCC uses 90 per cent of its sales to calculate the averages taking five per cent off the top and bottom of the ranges to remove outliers.